The Federal Reserve Bank of New York works to promote sound and well-functioning financial systems and markets through its provision of industry and payment services, advancement of infrastructure reform in key markets and training and educational support
to international institutions.

The New York Fed engages with individuals, households and businesses in the Second District and maintains an active dialogue in the region. The Bank gathers and shares regional economic intelligence to inform our community and policy makers, and promotes
sound financial and economic decisions through community development and education programs.

State average enrollment-weighted public college tuition and fees per school year rose by $3,843
(or 81 percent) between 2001 and 2009. How are recent cohorts absorbing this surge in college
costs, and what effect is it having on their post-schooling consumption? Our analysis of tuition,
educational attainment, and debt patterns for nine youth cohorts across all fifty states indicates
that the tuition hike accounted for $1,628, or about 30 percent, of the increase in average student
debt per capita among 24-year-olds between 2003 and 2011. However, estimates indicate no
meaningful response to tuition on college enrollment, years of post-high school schooling, and
BA degree attainment rates. Our findings are consistent with American youth having
accommodated tuition shocks not by forgoing schooling, but instead by amassing more debt.
They signal an active role for the U.S. student loan system in shielding young Americans’ human
capital investments against shocks to (students’) education costs. Further analysis demonstrates
that the tuition hike and student debt increase, despite leaving higher educational attainment
unchanged, can explain between 11 and 35 percent of the observed approximate eight-percentage-point decline in homeownership for 28-to-30-year-olds over 2007-15 for these same
nine cohorts. The results suggest that states that increase college costs for current student cohorts
can expect to see a response not through a decline in workforce skills, but instead through weaker
spending and wealth accumulation among young consumers in the years to come.